Monday, January 19, 2009

Fair Market Value?

Check out the article on fair market value over at Pharmaceutical Executive, an excerpt:

The best approach is to rely on the knowledge base of fair market value that exists in other settings. Fair market value is a term of art. It's generally defined as a value negotiated at arm's length between a hypothetical willing buyer and a hypothetical willing seller. The IRS has very clear guidelines on methodologies that are acceptable from the standpoint of a fair market value standard. Those standards and the fair market value body of knowledge can generally be cross-walked to the determination of the fair market value of a compensation arrangement. For example, with traditional business valuations the primary approaches are cost, income, and market. Likewise, in a compensation valuation setting, consideration can be given to the same three valuation approaches—so we're using the guidelines and the techniques that were developed in business valuations and applying them to compensation valuation.

As CME providers conduct their annual review of their faculty honorarium policy, they might want to include this article as part of that review process. Click here to access the article.